Looking ahead

Demand to resume growth in second quarter. The International Energy Agency (IEA) stated in its monthly Oil Market Report that global oil demand is expected to continue growing in second-quarter 2002. This forecast comes despite a sharper-than-predicted decline of about 680,000 bopd in the first quarter. The positive forecast on second-quarter demand is spurred by the recovering, global economy and strong demand from power generators in parts of Western Europe. The agency’s report also mentioned that rising prices pose a downside risk to demand forecasts. Partly responsible for the higher prices is the geopolitical risk premium that has been factored into the price, thus muting initial market response to events, such as Venezuelan unrest and the Middle East crisis.

World energy challenges to worsen in next two decades. U.S. Energy Secretary Spencer Abraham said that as the world’s need for energy grows, the challenge for all nations will be ensuring that supplies and the infrastructure needed for transport remain stable and secure. Addressing industry and government officials at the first-ever, two-day G-8 energy summit, Abraham emphasized balancing the need for more supplies with the desire for a healthy environment. Industry and government experts from around the world agreed to pursue a global approach to ensure security of energy supplies – a need heightened by the September 11 terrorist attacks. "We need also to prepare for the possibility of oil supply disruptions," said Abraham. By the year 2020, world consumption is projected to increase by 60%, to roughly 120 million bopd, he added.

BP to develop "world-class" find. BP said that its Atlantis discovery in the Gulf of Mexico is almost twice as big as initially thought, making it the third-largest field in the Gulf. BHP Billiton has a 44% stake in the find. The resources group said it had approved up to $355 million to invest in development of the field. BHP said that full project approval was expected later this year. BP had initially estimated Atlantis reserves at 300 million boe, but based on data from additional appraisal drilling in the field, it has revised estimated reserves, to 575 million bbl. Atlantis’ much-improved prospects might mark renewed interest in the GOM. BP has approved additional funding to move forward with developing the field. The firm faces development costs in excess of $1 billion. Production is set to begin in 2005.

Foreign firms continue to wait for access to Saudi’s upstream gas sector. The outlook for the prolonged negotiations between eight international companies and Saudi Aramco seem perpetually on the horizon. Talks on final contracts should have been completed by March, but it now appears that they could go on throughout the rest of this year and further. An experienced observer said, "Saudi Aramco has traditionally been a primary source for the conservative senior princes to maintain their patronage system, so it is in their immediate interest to ensure that Saudi Aramco’s position in the country power structure remains intact." The original signing ceremony for the Saudi Gas Initiative (SGI) took place June 2001, in Jeddah. It was the most dramatic example, to date, of efforts being made to open the kingdom to foreign investors.

TEES and GTI announce energy research partnership. Texas A&M University’s Texas Engineering Experiment Station (TEES) and the Gas Technology Institute (GTI) have signed a memorandum of understanding that creates a research partnership focused on ultra-deepwater petroleum development and unconventional resources. Under terms of the MOU, a new Texas non-profit company will be established. The firm will be called Research Partnership to Secure Energy for America (RPSEA). Formalization of the partnership is expected by the end of summer 2002. Roland Haden, vice chancellor for engineering and director of TEES, said RPSEA will play a leading role in cutting-edge research. That is essential to meet the future energy needs of the U.S. An initial $7 million worth of funding from GTI will enable significant efforts to begin immediately, said GTI President and CEO John Riordan.

Vietnam to expand overseas operations. Vietnam is negotiating with various countries as part of a plan to expand its operations abroad. The plan entails the country cooperating with foreign firms, to exploit about 800,000 t of crude annually by 2005, reports Vietnam News Agency. The figure increases to between 4 million and 5 million t by 2010, and 7 million t by 2015. Vietnam has won contracts to explore two tracts in Malaysia and five blocks in Mongolia. The country is negotiating with various Middle East countries for exploration and exploitation opportunities. Similar negotiations have been held with Libya, Sudan and Algeria. Local economists predict that Vietnam will be able to supply 30 million t of oil by 2015.

Canadian natives threaten to halt lease renewals. Canadian native Indians threatened to stop renewing leases held by majors operating on their lands in the Rocky Mountain Foothills west of Calgary, unless a federal agency takes concrete steps to collect more than C$10 million ($6.4 million) that the natives claim they are owed in royalties. Two chiefs of the Stoney First Nation said they were frustrated after years of trying to collect the money. The courts have ruled that the Indians are entitled to a reimbursement for various fees that companies deducted from royalties over the past decade. What is unclear, is how many years back the claims can go. The chiefs stopped short of threatening to blockade the lease sites. They charged the agency with dragging its feet and said that unless the issue is solved, they may not approve the renewal of leases.